Friday, 23 December 2016

Report From Hindunazistan - Barter Looks Pretty Good Now

Here’s the
latest on what’s going on with Modi’s Money Massacre.

My assistant
wanted to withdraw 24000 rupees from his bank account for reasons of his own.
In order to do that he would have had to go daily for twelve days to the ATM,
because (last I looked) Modi's government has put a limit of 2000 rupees of
your own money that you can withdraw in a day. That's assuming the ATM is
working and hasn't run out of cash (fat chance). So what I did was accumulate
my cash earnings until I had 24000 rupees (this took me a very long time
because I am earning a tiny fraction of what I should be earning at this time
of year, since nobody has money), and gave it to him, in return for which he
gave me a cheque.

This is a
pretty good example of what's going to happen in response to Modi's Money
Massacre: people are actually going to trust banks less and less, and keep
their money elsewhere - including unofficial "banks" such as people who
own safes and can keep your money until you want it, in return for a relatively
nominal fee. In other words, what it will do is drive more people away from banking, not the reverse. That's even
without the banks literally changing their own regulations hour to hour as the
whole mess gets more and more unmanageable.

For instance,
a couple of days ago the Reserve Bank of India suddenly declared - in the
middle of working hours, no less - that from that moment on, anyone who still
wanted to deposit old 500 and 1000 rupee notes would be able to do it only
once, and up to a maximum of Rs 5000. And in order to do that they'd have to
submit, in the presence of two bank officials, a satisfactory written
explanation. This was in direct contradiction to the Finance Minister's advice
to people to wait until bank queues shortened near the end of the year before
rushing to deposit their old notes, since they had until 30th December
to do so.

In response
to this bank order, literally between two customers, the banks started
implementing this - obviously making nobody happy. And by the very next day the
Reserve Bank withdrew its own order. Again.

As a matter
of fact, it doesn’t make the slightest bit of difference what the government
says, because the banks are pretty much making up their own rules now. Each
bank is imposing its own limits on how much cash anyone can withdraw, and
changing it from day to day, depending on how much money it says it has on
hand. That isn’t necessarily how much it actually has, of course, just how much
it admits to having. And the money it does, reluctantly, hand out is more often
than not only in the form of the utterly useless toffee-paper 2000 rupee
notes...which are useless because there’s no way to get change for them.

I read that
even Modi’s party is getting increasingly worried about the “fallout” of this,
which pretty much guarantees that the entire reason for creating this mess was
to win state elections due for next year; first, by crippling the other parties
financially, and, secondly, by temporarily boosting Modi’s popularity as a “crusader
against corruption”. Only, the implementation has been so incredibly
incompetent, even by Hindunazi standards, that after putting all of us through
all of this, Modi might not even be able to achieve that.

So what is
this demonetisation, anyway? It’s nothing more than a scam.

Here’s how
the scam works:

What is money? In
modern terms, it's an IOU note issued by a state to its citizenry. If you cash
in the note by depositing it in a bank the state, in effect, gives you the
value of the money for as long as you keep it in the bank. When you withdraw it
you get an IOU again with each currency note.

Now suppose you're
someone who's borrowed from ten people. You have enough to repay eight of them, but
not all, and your revenue isn't enough to increase that number. Besides,
you want to buy yourself a new house.

At this point,
suppose you tell your creditors - who are scattered all over the country

then. Out of ten,
say only seven manage it on time, as you'd expected. You pay

and if they want
their money back they'll have to get to your house before them off and with the
eighth, whose money you could have paid back, but didn't since he didn't come
on time, you buy your house.

If you're an
ordinary citizen you can't get away with this, but since you control a

government, its
media, its armed forces and all the coercive apparatus at its

still years away.
And the money, that is, IOUs which weren't handed in on time

disposal, you can.
If the people rebel, they'll be put down. Elections are can be
"loaned" to crony capitalists and party functionaries and be made to disappear.

Under these
circumstances, the worst thing that could happen is if those ten

creditors all
managed to turn up on time, because then you'd go bankrupt. And

so you must make
it as hard as possible for them to turn up on time. Making

things difficult
for IOU holders isn't a glitch; it is the whole point of the exercise.

(This has
been your report from Demonetisationistan. Stay tuned for further bulletins.)

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